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Posts Tagged ‘dead cat bounce’

fallen from graceland

fallen from graceland

Has Elvis left the building?

The market plunge continues to frustrate bulls and bears alike.

Extra-ordinary bounces like yesterday are meant to do one thing: squeeze shorts and hope they go away.

The egregious run-up over night is a great example of mis-direction. It stops out the shorts position trades, and then it entices buyers to be looking the wrong way and buy pullbacks as the car is falling off the cliff.

Smart shorts NEVER short too low, accept stop outs, and if unwilling to ride the elevator up courtesy of the PPT and rumors about bailouts, at least wait until the apex is hit and then use the signal bar technique to say “take a shot here”.

Trying to buy pullbacks long all morning was suicidal. Today’s double bottom bounce that had bulls cheering for 1200 and 1210 at the close was wishful thinking.

They were still reading from yesterday’s playbook. A new page was inserted, and only the most gullible of newbies believed that script.

Sometimes we need a hound dog to sniff out the truth, sometimes just a little common sense.

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“Amity Island had everything. Clear skies. Gentle surf. Warm water. People flocked there every summer. It was the perfect feeding ground…”

At 11:30 I suggested to colleagues to take their short profits off before noon today. It could have gone to any day low, but I felt the weekly shorts should capture their profits early after such a great week.

It turned out to be a lucky call.

Guessing against the trend is never easy, but odds and probability shift and you have to adjust your plans accordingly. (Remember the Commander’s Intent theory?) 

There are many techinques that technical traders use to project possible targets, but it is not an exact science; it is more about being prepared for areas  or “zones” of support and resistance, and then not being stubborn when the momentum clearly shifts from one side to the other.

When there is blood in the street, be on the lookout for jaws.

 

jaws loves to catch those late to the party

jaws loves to catch those late to the party

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